Our team is working with a donor to establish a scholarship program for his employees. This is new to our foundation, and we want to ensure we set it up correctly. Is anyone willing to share their agreement language, criteria, scholarship committee makeup, process for working with HR to make sure you are meeting the percentage test, etc.?
It is my understanding that a DAF cannot fund grants to individuals/scholarships. If this donor has both a DAF and a scholarship fund, can he make annual interfund transfers to the scholarship fund out of his DAF? Does the IRS consider this to be the same thing?
If this has not been a topic for a Coffee Talk, how do we go about making the suggestion? I feel like this is something so many of us steer away from.
Many thanks for the guidance and resources - Happy Holidays to the Foundant family!
@ErinStarnes We have also tried to steer away from these. A couple have come to us, but we said they have to be open beyond employees. In one case it was a restaurant group, so we also made hospitality students at our community college eligible, and the other case was a hospital that wanted grants for nurses, so we opened it up to nurses at the community health centers as well. Practically speaking, in both cases, the companies that are funding the scholarships do a lot of promotion and we generally only get applicants who work at those places.
We do have donors who have DAFs and make annual internal grants to their scholarship funds, so I hope that is okay!
This is the language as I understand it, and I'm eager to hear from others.
Employer-related scholarships can’t be used to recruit employees, induce employees to continue employment or compel employees to follow any other course of action sought by the employer. Recipients must be selected by a committee completely independent of the employer, the company foundation, and individuals or entities (other than the employer) that fund or control the foundation. Recipients must be chosen on objective standards that are unrelated to their employment or the employment of their parents, or to the employer’s line of business. In addition, awarded grants may not be terminated due to termination of the recipients’ or recipients’ parents’ employment.
Bottom line is that it could not be tied to performance or employee benefit, and no one from the company could be involved in the selection.